Site Navigation

Site Mobile Navigation

Congress, Sanctions and Iran

The United States already bars nearly all trade with Iran. Congress tightened those restrictions even further last week when it voted to punish foreign companies and banks and American overseas subsidiaries that do business with the Islamic Revolutionary Guards Corps in Iran and its many front companies. Firms selling gasoline to Iran also are targeted.

The legislation, which President Obama signed into law on Thursday, is part of an intensifying international campaign to pressure Tehran into abandoning its illicit nuclear program — a goal we strongly support. Extraterritorial sanctions are always problematic. They can open American companies to retaliation and provoke a political backlash.

If these sanctions give foreign companies more reason to cut their ties with Iran, that would be good news. Unless they are used sparingly, they could strain relations and make it even harder to persuade governments of the need to isolate Iran.

Iran has ignored repeated demands by the United Nations Security Council to halt enriching uranium. After four rounds of Security Council sanctions, many governments and businesses still find Iran’s oil wealth too hard to resist. There are some signs that may be changing, but Washington will have to keep pressing.

The latest Security Council sanctions are mainly focused on cutting off Iran’s access to the international financial system and ending dealings the Revolutionary Guards Corps, which runs the nuclear program and a lot more. They still leave countries too much room to maneuver.

The resolution urges — rather than requires — states to close Iranian banks with any links to the nuclear program and calls on — rather than requires — states to deny insurance coverage to Iranian shipping and other businesses with links to proliferation.

An error has occurred. Please try again later.

You are already subscribed to this email.

The new American law goes further and mandates real penalties from a range of options. Foreign banks that do business with certain Iranian banks or with the Revolutionary Guards Corps or its front companies could be banned from doing credit transactions or foreign exchange activity through American banks. Foreign companies could be denied United States government contracts, export credits and access to American markets.

The Security Council resolution does not bar companies from doing business in Iran’s energy sector. The new American law would punish companies that supply Iran with gasoline or the means to expand its own refining capacity. Companies that finance, broker or insure the shipments or deliver the gasoline could also be sanctioned. That frankly worries us.

If Tehran keeps pressing ahead with its nuclear program, the international community may have to restrict gasoline sales to Iran. That could hurt ordinary Iranians and rally support for the government. Since the demand on foreign companies goes beyond what the Security Council is requiring, it could shift international anger away from Tehran and toward Washington.

Many of the banks and companies most affected by the new law are in Europe (especially Germany), China and Dubai. Russia, Malaysia, Turkey, India and Pakistan could feel its sting as well. The Europeans, who bitterly fought previous rounds of extraterritorial sanctions, seem less worried now. The European Union recently adopted its own tougher sanctions, including a ban on new investment in Iran’s energy sector. Dozens of European firms claim to be pulling back or out of Iran — a commitment that has yet to be tested.

Previous American administrations have waived similar extraterritorial sanctions. Congress is insisting that President Obama enforce this new law. It also gave him some room to waive punishments, on a case-by-case basis, on companies in countries that are cooperating with efforts to isolate Iran. Political and business leaders should give Mr. Obama every reason to do that. For this to work, the White House will also have to exercise considerable diplomatic finesse.

A version of this editorial appears in print on July 3, 2010, on Page A18 of the New York edition with the headline: Congress, Sanctions and Iran. Today's Paper|Subscribe